Q4 2019 Earnings Call
This time, all participants are no listen only mode. After the speakers presentation. There will be a question and answer session to ask a question. During the session. You want me to press Star one on your telephone if you acquire any further assistance. Please press star zero. Please be advised to today's conference is seen report.
I would now like they had the conference over to your Speaker today, Calphalon Taylor Vice President head of Investor Relations. Thank you. Please go ahead.
Good afternoon. Thank you for joining us and welcome to E. Bay's earnings release Conference calls for the fourth quarter of 2019, joining me today on the call or Scott Shankle, Our interim Chief Executive Officer, and Andy Crane, Our interim Chief Financial Officer.
Turning to slide presentation to accompany Andy's commentary during the call, which is available through the Investor Relations section of the ebay web site at Investor Stuckey, They Inc. dot com.
Before we begin I'd like to remind you that during the course of this conference call. We will discuss some non-GAAP measures related to our performance you can find a reconciliation of these measures to the nearest comparable GAAP measures in the slide presentation accompanying this conference call. Additionally, all revenue GMB growth rates mentioned in Scotland, and these remarks represent FX neutral.
Year over year comparisons unless they indicate otherwise.
In this conference call management will make forward looking statements, including without limitation statements regarding our future performance unexpected financial results. These forward looking statements involve known and unknown risks and uncertainties.
Actual results may differ materially from our forecast for a variety of reasons you can find more information about risks uncertainties and other factors that could affect our operating results in our most recent periodic reports on Form 10-K and Form 10-Q .
And our earnings release from earlier today.
You should not rely on any forward looking statements all information in this presentation is as of January 28, 2020, and we do not intend and undertake no duty to update this information.
With that let me turn the call over to Scott.
Thanks, Joe Good afternoon, everyone as I mentioned last quarter or focus was to deliver our Q4 and for your commitments.
Execute on or growth initiatives of manage payments in advertising.
Improves the buyer experience and software capabilities and make cargo center portfolio and operational reviews.
For 20, and beyond we would assess how to deliver for buyers and sellers were ensuring our focus we focused investments to serve our customers and shareholders.
Let me walk you through each of these in more detail specific to our Q4 commitments Lorem was in line with our expectations down 4%, while organic revenue was at the high end of our guide up 1%.
Margin was strong at over 29% inclusive of our ongoing investment in managed payments.
non-GAAP EPS was 81 cents up 15% substantially better than expected. In addition, we reached a deal to sell stubhub to via Gogo for $4.05 billion well following a disciplined process that led to a favorable valuation.
For the full year 2018, GMP was down 2%, where organic revenue growth was 3% at the high end of our January outlook.
non-GAAP earnings per share grew double digits, each quarter and was above our guidance and we drove strong productivity, allowing us to reinvest into managed payments, while delivering one point of margin accretion.
Additionally, as part of our operating review, we announced plans to further reduce expenses to reinvest SCRA in growth initiatives and improved profitability.
The net of these actions as expected the yield at least two points of margin accretion over the next three years.
Finally, we returned $5.5 billion to shareholders through share buybacks in our first ever dividend.
Since separating from paper, we have repurchased approximately 35% of shares outstanding net of dilution.
For the year GMP declined primarily due to two headwinds first we indicated that we would reduce marketing that was not activating buyers with high lifetime values.
While reducing near term GMP and buyer growth. This all sort of drive a drove a higher take rate and better profitability. The second was the implementation by U.S. States of Internet sales tax this rollout happened faster than anticipated and affected small businesses and consumers sellers, requiring marketplaces to collect and read.
On their behalf.
We expect this headwind to continue until we lap a fully rolled out in the U.S. Internet sales tax landscape.
We remain hopeful and are advocating that the U.S., we'll take a national approach to simplify compliance requirements and reduce the burden on small businesses.
Well dealing with those volume headwinds organic revenue grew five points faster than GMB much of which came from our growth initiatives managed payments in advertising.
Regarding managed payments, we continue to make great progress on our journey to transform our ecosystem.
It's interesting since launch we have process more than $2 billion of GMP for almost 25000 sellers on our payment rails.
Well, our pricing has been discounted to record to reward early participation to date sellers has saved almost $10 million in fees and they have more options on how and when they get paid.
As we exited the year, our U.S. volume approach to limit permitted under the operating agreement well in Germany, we ramped from zero to 3% faster than our U.S. room.
We remain confident in realizing an incremental $2 billion in revenue and half a billion dollars of operating income in 2022.
Advertising continues to drive revenue growth in Q4 promoted listings delivered $136 million of revenue up 75%.
Over 1.1 million sellers promoted more than 320 million listings in the quarter.
For the year promoted listings revenue doubled and helped us reach or plan of more than $700 million in total advertising.
Well, we have started to lap significant acceleration from a year ago, we still expect double digit advertising revenue growth going forward.
This performance was supported by deeper integration into listing flows and the seller hub, which increased adoption. In addition add conversion was up due to improved algorithms, which utilize structured data to enhance search ranking.
We remain on track with our plan to build a 1 billion dollar advertising business.
Over the course of 2019, we improved the buyer experienced by increasing the collection and use of structured data we collected more aspect data from sellers in fashion and home categories by making it easier to see what buyers were searching for and the listings flows and the seller tools when sellers uploaded that.
Data the structured data enrich listings make search better and convert faster.
This additional data contributed to improved merchandising our per thems and promoted listing relevance in search.
We also improved or seller hub over the course of the year. In addition to the tariff peak integration. One feature we launched with seller initiated offers whereas seller can engage individual buyers with better deals.
This feature has grown to over 1 million offers per day with pricing options and an easy to use automated experience.
We are pleased that we delivered on our 2019 commitments as we enter 2020 or parties are clear we will continue to drive revenue through our growth initiatives deliver more seller tools improved the buyer experience by leveraging our structured data foundation, well driving more margin expansion.
Managed payments will reach an important milestone in July when our operating agreement expires and we will be ready to scale Rita rapidly scale additional countries in quarters, while delivering a better customer experience.
For advertising, we will provide sellers more tools to optimize their AD spend we expect we expect this will increase conversion and improved pricing without adversely impacting the buyer experience.
For sellers, we will expand insights and data in the seller hub, while improving our guidance capabilities. We will also remove friction from the consumer selling experience, particularly on mobile.
For buyers, we will build better vertical capabilities that will start in a few categories and scale across the platform.
With features such as payments for high dollar items with escrow and clear item condition definitions.
We will also focus on improving buyer trust through increased shipment tracking in our international markets.
All of these experience were level all of these experiences will leverage aspect data, which will lead the benefits in search recall ranking and relevance. We also plan to collect more data and electronics fashion and home and garden to increase the overall aspect data population.
While delivering on these better experience for customers, we will drive further margin expansion by simplifying our structure controlling costs and reducing in effective marketing spend.
For buyer focused marketing, we will rebalance spending between acquisition retention and frequency.
Finally, there are two topics I would like to proactively address.
First regarding the portfolio. Our primary objective is to maximize shareholder value, we evaluate each business in our portfolio for long term synergies and value creation opportunities.
When we take action like with Stubhub, we utilize a consistent set of guiding principles, including valued ebay shareholders speed of execution certainty to close and operational simplicity.
Our board and leadership team continue to operate with these guiding principles and we anticipate having an update to share about our classified business by the middle of this year.
We appreciate that our employees continue to maintain focus in a time of uncertainty about what the future structure of classified as might be well everyone is excited about the opportunities that could bring.
Second regarding the CEO search the board is actively conducting a process with the supportive a search firm and is considering internal and external candidates.
In the interim leadership team has the full supported the board and we continue to make changes to better serve our customers employees and shareholders over the past few months, we have reprioritized, our product roadmap, we allocated marketing investments and simplified our structure by elevating our largest on platform marketplaces regions and global Mark.
Nation to the executive leadership team, we are increasing focus on the marketplace business, which is where we see the biggest value creation opportunity.
Our top 2020 properties remain clear deliver our growth initiatives provide more solar tools improved buyer experiences leverage our structured data foundation, all while delivering margin expansion.
We believe these changes will result in a better balance of stena of sustainable growth and profitability that maximizes long term shareholder value.
Our teams are excited about the challenge and look forward to delivering on these commitments now let me turn it over to Andy to provide more details on our financial performance Mr. Crane.
Thank you Scott I will begin my prepared remarks, with our Q4 financial highlights starting on slide four of the earnings presentation.
In Q4, we generated $2.8 billion revenue.
81 cents of non-GAAP , EPS and $672 million or free cash flow.
While returning $1.1 billion to shareholders through share repurchases and cash dividends.
Moving to active buyers on slide five.
We have a 183 million active buyers representing 2% year on year growth.
This is a two point deceleration from Q3, driven impart by reduced marketing spend that was driving growth and buyers with lower engagement and a higher churn than we expected.
Moving to slide six.
Q4, we enabled $23.3 billion of GMB down, 4% decelerating two points versus the prior quarter and the U.S., we generated $8.9 billion down 8%, while we delivered $14.4 billion internationally down 1%.
Moving to revenue on slide seven.
We generated net revenues of $2.8 billion up 1% organically.
We delivered $2.3 billion of transaction revenue up 1%.
$539 million of marketing services, and other revenue down 5% inclusive of a seven point headwind from the sale of brands for friends.
Turning to slide eight.
Our marketplace platform GMB was down 4% in Q4 decelerating two points versus the prior quarter.
You asked GMB was down 9%.
Driven by six point impact from Internet sales tax and four points from the continued reduction in redistribution of marketing spend.
The impact of Internet sales tax in Q4 was three points worse than Q3.
I was 11 more states, including California, and Texas went live in October .
International JV was down 1% decelerating two points versus Q3.
Primarily driven by lower consumer confidence in the UK from uncertainty surrounding Brexit and the reduced on platform marketing spend.
Total marketplaces revenue.
Was $2.2 billion down 1% decelerating two points from the prior quarter.
Transaction revenue grew 1% a three point celleration.
The gap between revenue and GMB growth continues the five point gap in Q4 was driven by three factors.
Over three points from promoted listings nearly one point from category mix effects.
Nearly another point from the continued growth and manage payments.
Looking forward, we expect to contribution of payments revenue to significantly increase and the second half of 2020.
Leading to revenue growth remaining at higher levels than GMB growth until fully scaled.
Marketing services and other revenue was down 17% decelerating four points versus Q3.
The year on year decline is driven by 13 points and the sale of brands for friends.
And the continued reduction of third party assets.
Marketplace segment margin was 32% up nearly one point year on year, primarily due to reduced marketing and continued cost leverage.
Partially offset by our investment in managed payments.
For the full year, the marketplace platform generated $85.5 billion of GMP.
And 2% and $8.6 billion of revenue up 2%.
Turning to slide nine Stubhub, GMB was down 5% decelerating five points from Q3.
Mostly from the week event landscapes landscape and concerts in theater.
Stubhub revenue grew 2% year on year versus 5% in Q3.
Transaction revenue was down 2%, a two point deceleration driven by volume.
Partially offset by a higher take rate from pricing changes at event mix.
MSN, though has more than tripled year on year for the fourth straight quarter.
Delivering $16 million of revenue in Q4.
Most of Stubhub them SNL revenue was first party sales, which represents which provides buyers access to unique an exclusive inventory and insurance from purchase tickets.
Stubhub segment margin was 22% down nearly four points, primarily driven by investments in our first party business and consulting costs, partially offset by lower marketing spend.
For the full year, Stubhub delivered $4.7 billion of GMB down, 1% and $1.1 billion in revenue growing 4%.
Moving to slide 10 in Q4 classified revenue grew 6%.
Decelerating two points.
Our German businesses continued strong double digit growth.
Driven by our market, leading horizontal ebay kleinanzeigen and our vertical motors platform Mobileye.
In addition, we are delivering strong growth in verticals across the portfolio.
The quarter on quarter deceleration is primarily driven by continued headwinds in horizontal display advertising across our markets outside of Germany.
Segment margin for classifies was 43% down one point year on year.
For the full year classified generated nearly $1.1 billion of revenue up 9% versus the prior year.
Turning to slide 11, and major cost drivers.
In Q4, we delivered non-GAAP operating margin of 29.3%.
This is up 10 basis points year on year inclusive of a full point of investment and managed payments and additional pressure from the growth and our first party inventory programs in Korea and Stubhub.
More than offset by reductions in marketing and the divestiture of rents for friends.
Cost of revenue was up 160 basis points year on year as a percentage of revenue.
Driven by scaling managed payments and our first party inventory programs, partially offset by the divestiture of brands for friends.
Q4 sales and marketing expense was down over three points versus the prior year, primarily driven by double digit reduction in marketing and promotional spend in our marketplace on platform business, while increasing year over year investments in our marketplace off platform businesses.
Product development costs were up 70 basis points from investments and managed payments and then classifies to expand our vertical offerings.
DNA was up one point, mostly driven by portfolio and operating review costs and our continued investment managed payments.
For the year operating margin was 28.2% up one point and inline with our original 2019 full year guidance.
Turning to essence slide 12.
In Q4, we delivered 81 cents of non-GAAP EPS.
Up 15% versus the prior year, our seventh consecutive quarter of double digit non-GAAP EPS expansion.
The non-GAAP EPS growth was driven primarily by our share repurchase program.
The lower tax rate and operating efficiencies.
Partially offset by FX and our investment in managed payments.
Favorability versus our guidance in October was mostly driven by continued cost control and an in period tax benefit.
For the year, we delivered 22% growth in non-GAAP , EPS, primarily driven by our share repurchase program and expanding operating leverage.
GAAP EPS for the quarter was 69 cents down 14% versus last year.
The decrease in GAAP EPS is mostly driven by higher tax rate as we lap at 2018 deferred tax adjustment.
Partially offset by gains associated with the audience warrant and share repurchases.
As always you can find the detailed reconciliation of GAAP to non-GAAP financial management measures and our press release and earnings presentation.
Moving to slide 13.
In Q4, we generated $672 million of free cash flow.
Down 39%, mostly.
Driven by timing of both working capital and cash taxes.
We had another strong year of cash generation, finishing 2019 with nearly $2.6 billion a free cash flow.
A 27% increase year on year, driven by lower cash taxes improve working capital and lower capital expenditures.
Moving to slide 14.
Our capital allocation strategy and key tenants and targets have not changed.
For the quarter, we ended with cash and investments of $3.8 billion and debt of $7.8 billion.
In Q4, we repurchased nearly 28 million shares at an average price of $36 in 19 cents per share.
Amounting to $1 billion.
We ended the year with $2.2 billion of share repurchase authorization remaining.
Turning to slide 15.
In July we shared progress on our capital allocation plan for 2019.
Looking at that same view today, we have delivered against all the markers we set out for the year.
We initiated and executed our first ever dividend.
We completed $5 billion in share repurchases.
We ended the year with cash of $3.8 billion above our year end target of $3.5 billion driven by our Overperformance on free cash flow.
And we maintained our triple B rating, while delivering on our stated ratio targets.
1.5 times net debt and below three times gross debt to EBITDA.
Moving to full year guidance on slide 16, the 2020 guidance, we are providing assumes our current portfolio, including stubhub is in place for the entire year.
We will provide updates as appropriate moving forward.
I also want to provide a little more context on the impact of Internet sales tax.
Throughout 2019 states implemented marketplace responsibility to collect sales tax our sellers in our volume were negatively impacted.
In each state we saw an immediate drop in volume fall followed by relatively stable growth rates in the months that followed.
We expect growth to recover as we lap the launch dates and affected states.
An early data from the states that launched in January of 2019 shows that recovery.
Given these dynamics, we expect the negative impact of Internet sales tax to be modestly larger in the first half with more states launching.
And then start to taper off in the second half as we lap quarters, where larger number of states went live in 2019.
Please refer to the appendix of the earnings deck for additional details on the impact of Internet sales tax on our U.S. marketplace business throughout 2019.
Including the timing of one states launched.
With that as background, we are projecting 2020 revenue between 10.72 and $10.92 billion growing 1% to 3% on an organic FX neutral basis.
Minus one to plus 1% on an as reported basis.
We anticipate two points of growth to come from the continued ramp of managed payments and one point from advertising, which we expect to be approximately $800 million in 2020.
Underlying this guidance, we expect marketplace year over year volume to declined low single digits consistent with our 2019 performance as an increment incremental point of Internet sales tax pressure will be offset with improvements in conversion.
We expect stubhub to deliver low single digit revenue growth and the classified as we expect similar topline growth to 2019.
We anticipate the stronger us dollar and the disposition of brands for friends to negatively impact 2020 revenue by approximately $200 million compared to 2019.
We plan to deliver additional operating margin expansion, while we invest in the long term growth of our business.
We expect margin of 28.5% to 29.5% for the year, which at the midpoint represents an increase of 80 basis points versus 2019.
This margin expansion will be driven driven by continued marketing optimization.
Focused product and technology investments.
Best in class corporate functional cost and more effective procurement.
Partially offset by approximately one point from our investment and managed payments.
Currency headwinds.
We expect non-GAAP effective tax rate in the range of 15.5% to 17.5%.
With regards to capital allocation.
Guidance implies approximately $1.5 billion of share repurchases in 2020 inclusive of dilution offset.
In January our board approved a 14% increase to our quarterly dividend raising it to 16 cents per share.
The dividend will be payable to shareholders of record as of March 2nd with the payment date of March Twentyth.
Our board has also approved an additional share repurchase authorization of $5 billion would know exploration.
We have not made any assumptions in this guidance for the use of stubhub proceeds.
Should the deal close in Q1 as anticipated you can expect that we will deploy that cash in a manner consistent with our capital allocation tenants.
We are projecting non-GAAP EPS of 2.95 to $3.05 per share up 4% to 8%.
This includes the impact of modest topline growth.
Additional margin leverage and the ongoing benefit of our share repurchase program.
Growth is partially offset by our investment managers payments and approximately seven points from the combination of a stronger U.S. dollar less interest income based on lower cash balances and a higher tax rate as certain benefits impacting 2019 won't repeat.
We expect free cash flow of $2.2 billion to $2.4 billion, which assumes capital expenditures in the range of 4% to 6%.
Full year GAAP EPS is projected to be $2 and 18 to $2 in 28 cents per share.
Turning to slide 17 for Q1.
We are projecting revenue between 2.55 and $2.60 billion growing minus one to plus 1% on an organic FX neutral basis.
It's important to note that given the second half ramp of managed payments following the end of the operating agreement.
And the lapping of the Internet sales tax headwind that we expect our second half performance will reflect higher growth rates for volume and revenue compared to the first half.
We expect non-GAAP EPS of 70 to 73 cents per share.
Representing 4% to 9% growth.
EPS growth is driven primarily by the combined effect benefit of lower share count and operational growth.
Partially offset by investments and managed payments.
In addition, there are four points of headwinds from the combination of a stronger U.S. dollar and less interest income based on lower cash balances, partially offset by a lower non-GAAP tax rate.
We are expecting GAAP EPS in the range of 50 to 53 cents per share in Q1.
In summary, while 2019 volume growth was challenged we delivered on our financial commitments and our growth initiatives, while laying a strong foundation for 2020 and beyond.
We ramped managed payments according to plan and scale better buyer and seller experiences, including launching in the second market.
We delivered strong advertising revenue, including triple digits within promoted listings.
In 2019, we delivered a point of margin expansion, despite pressure from lower volume and our investment and managed payments.
We executed a comprehensive operating review.
And are on track to deliver at least an additional two points of margin expansion over the next three years.
We continue to return capital to shareholders, initiating our first ever dividend and we repurchased $5 billion of our stock.
We continue to make progress on our portfolio review.
Divesting brands for friends, and reaching an agreement to sell stubhub at a favorable valuation.
We've reorganized the leadership and operational teams to deliver better outcomes in our marketplace on platform business, increasing focus on our customers and speed of this decision making.
We entered 2020 focused on our top priorities managed payments advertising, providing more seller tools, improving buyer experiences and leveraging our structured data foundation.
As we navigate through a period of lower volume growth. Our plan is to deliver continued revenue and earnings gross margin expansion and a consistent capital allocation strategy to maximize shareholder value.
And now we'd be happy to answer your questions operator.
Ask a question. Please press star one on your telephone keypad. The first question comes from Keith carry of Goldman Sachs. Please go ahead. Your line is open.
Thanks, I was wondering if you could give us just a if you could just give us a sense.
Of the guidance as we look at 2020.
Is there a is there a way to kind of disaggregate the impact both of.
The Internet sales tax would you guys have given us a lot of information on which I think we all appreciate but some of your initiatives around focusing more on.
What you see as being kind of the core.
Ebay.
Revenue in the court ebay.
The businesses and sort of chasing what I think in the past you've kind of described as being less profitable.
Revenue as you look to sort of focus more on.
On sort of the higher value or core ebay experience.
Is there a way to.
This aggregate sort of the impact that that is having on on guidance for the impact that thats, having on on the growth that you're you're guiding to for this year and then as we.
Hi, guys, we think about started the process around.
Around the classified side of the business you've in the past talked about sort of the complication of pursuing anything less than a.
Full sale of the the asset.
I was just wondering if you could give us a bit of an update on sort of your thoughts around.
As as you've gotten further into this sort of what what would make sense along those lines.
As well thank you.
Sure the.
It's Andy I'll start with.
A couple of answers on guidance and then I think Scott will.
Kick in on the classified side.
It's I think.
What I tried to point out in the script and as you think about.
The volume guidance being relatively consistent year to year.
In the low single digit for marketplaces, it'll have a very different dynamic half to half.
The first after the year with I ask Steve really at full ramp.
Well look more like Q4 in the second half of the year, we'll start to we'll start to accelerate a little bit.
As we lap out of some of those states.
When you elevate up and you look at that on a full year basis. We go from about a little over a point of iced tea impact in 2019.
To something a little over.
A point of it or two points of impact in 2020, So an additional point of pressure from my estee or two full points of negative volume pressure from my SDN 20.
So that's how to think about about that and then on a less profitable revenue piece.
We continue to refine.
How we allocate the marketing spend.
And I think similar to the I.S.T. dynamics, it won't be drastically different impact 19 versus 20.
Where we.
I feel like we'll have roughly a point of negative impact from continued refined refining continuing to refine.
How we allocate the marketing spend in eliminating.
Some of the lower or ROI spend.
Yes, he thought on on the sale classified kits as as I think everyone understands a great business and a wonderful space we've got.
One of the leading if not the leading asset in the industry.
And this is about shareholder value creation. So at this point I would not exclude any option.
Although it's unlikely that we would pursue an option of.
Of divesting.
Platform by platform.
Which a lot of people have reached out on that that's not really in our I think our best interest or or in line with maximizing shareholder value creation, but it's completely doable and we're looking at all those options and as I said expect Avenue, a a an update on that by mid year.
Great. Thank you both.
Your next question is from Eric Sheridan of you've yes. Please go ahead. Your line is open.
Thank you so much for taking my questions maybe to apply Ken on the marketing piece. How long are you on the marketing optimization will give us your goals of most of the year share you talk about continuing to reduce exposure to the lower or a lot of channels just wanted to get a better sense of like the linear already going forward through 20 and beyond the tower.
Sort of accomplish those goals and then with the growth headwinds you might be peaks in the first step would you characterize them as a two hands type year end 2020, let me thoughts around lean again, just some of the paid marketing channels that are delivering for you on sort of how the gap first half second half component to the marketing expenditures in 2020 or how we should think about.
Thanks, so much about.
Eric This is Scott I would I'd characterize the 2020 marketing costs as coming down approximately in line with the same as we came down in 2019, and so we don't expect material headwinds in growth, but it will be reducing our underlying marketing spend but within that.
For sure we'll be reallocating as I mentioned that would include reallocating into a paid search to help to help growth, where we think it makes most sense and where the returns makes sense as well.
Next question.
Hello comes from Colin Sebastian of bars. Please go ahead. Your line is open.
Thank you first I guess on the pricing experiments with sneakers wondering what you're seeing there in terms of listing activity and we'll determine if that's a model that that could work in other categories outside of shoes, and then maybe as a follow up on the marketing spend but more specifically.
Inshell plateauing of active buyers since I think in past quarters, you guys have indicated that this is an important CPI.
So the health of the platform overall and potential future growth.
Are there any specific efforts geared at.
Re accelerating the number of active buyers. Thank you.
Hey, first on US sneakers, Yeah look it's a it's an interesting and ensuring interesting question and certainly interesting in terms of what we did in December .
As you might know our online marketplace as one of the widest and most.
And most unique set of inventory of sneakers out there and we have a history of experimenting with different types of selling promotions across different markets and in this case, where we announced in December was the sneakers promotion that was a continuation of that practice of experimentation.
So it's in two markets and in sneakers over $100 and so what we're looking for is really how does the monetization change.
You think about no final value fees and sneakers over a $100, but there's other dynamics at play here, including our first party ads and a in another dynamics, where we're trying to look at conversion and accelerated active buyers in those categories and so to date we've seen.
In some added benefits not only with additional promoted listings, but also with additional listings by up by sellers activity by buyers and GMB and so as we look at that and then consider what we're going to do at the product. It's a it gets pretty interesting from here and we'll see.
Where we go from here, but right now, it's a very small scale, but very interesting experiment.
Yeah, I think the only thing I'd add to that Scott to your point, it's one category into markets.
But it's a way we cannot really highlight the breadth and depth the inventory we have across across this competitive vertical so feel good about that.
An active buyers look on active buyers couple a couple of thoughts first off active buyers is always important Weve index recently.
And over weighted on getting active buyers.
New active buyers into this ecosystem and as we've done a highlighting over the course of 2018, that's favorite active buyer growth, particularly with new and react where we called new in reactivated buyers.
As we look into 2019 or 20, well continue investing in new buyers, but we're going to migrate some of that spend into getting those new buyers that we brought into the ecosystem over the next last four quarters and get them to try and buy more and so it's going to be more about generating the GMP and the GMB.
The from them.
While we look at and continue to explore ways to expand the GMP per buyer in our retained buyer base, which by the way in Q4 was very stable, which is I think great news and as we pivoted into next year, you can expect us to look a little bit less towards bringing a whole bunch of new buyers and.
But making continuing some investments there, but expanding more into converting those buyers that we brought in last year and our retained buyer base as well.
Okay. That's helpful. Thank you.
Yeah. Thanks.
Question from Ross Sandler of Barclays. Please go ahead your line is open.
Hey, guys just two questions. So thanks from detailed on slide 20 on the iced tea. So are you basically saying that if we look at these four quarters that you improvement you seen excise tea.
Lapping couponing initiatives are there other things that you're working on that are driving that that uptick from down six to only down three in recent quarters and then as we move forward your guidance. It seems like over the years starts kind of flat in 2020 in the back half is going to be up about 4%. So was that Jim.
The growth picking up or is that from payments kicking in in second half any color there on those two that'd be great.
Yes, I think on the on the half versus half it's it's both.
It's certainly an improved an increase.
Lift from payments.
As I said, what we'll get two points roughly two points of revenue growth from payments in the year and remember where cap through July on what we can what we can do in the U.S. and were and will quickly get to that cap in Germany here in the in the first and second quarter.
So the majority of that two points of revenue growth is going to be coming in the second half.
And then with.
GMB as well you'll have the combined impact of the conversion improvements and initiatives. We're working on that some of the things as Scott mentioned in addition to.
No.
Point of improvement half over half just from from lapping out of is the.
Thanks Ross.
Your next question comes from Steven Q of Credit Suisse. Please go ahead. Your line is open.
Okay. Thank you so Scott I wanted to understand how you're thinking on payments may be evolving.
Now that you have another quarter of ops under your into rearview. So I think in the past you guys had articulated a a hard fourq scenario when the contract comes off I guess now more of a gradual transition. So has that thinking changed in terms of the speed at which you are willing to go, especially now that you're running up against the guard rails in terms of.
Can do second any.
Directional comments or you can offer about what percent of your sellers have bought into using a promoted listings.
And what that by 10% May look like in the newer markets in the west versus some of the I guess the older markets like Korea, where this has been life for sometime now thanks.
Yes, a couple of thoughts on payments source I don't I view, our payments evolution is going right on track right now and the the gradual and this is only in the near term in the sense that we're guardrail with what we can do between now in July I once were independent of the the operating agreement.
Paper, though we will go hard at at not only that two markets that we're in and expand the number of sellers and the GMB that's covered in the ecosystem in both us in Germany, but we'll expand into the markets and other quarters and so.
We're on track if not better than we thought as we look towards the second half of the year with regards to promoted listings.
I'll, let Andy if he has his numbers weigh in on that but on the on the promoted listings within the U.S., but you see well sorry within the Mark on platform marketplaces business is roughly 30% of listings are actually getting some form of promoted listings utilization.
And as we look forward I will learn from our Korea business, which has a much higher percentage, but a completely different take rate and so what we've said overtime is that as we scale promoted listings and modify how we think about not only the user experience, but also the monetization of those out.
Thats to make sure that it's a valuable thing for sellers and are they view it as marketing expense versus just to take rate and a requirement and you can you I would expect us to continue to it or eight that as we move forward within the plans that we've laid out.
And in terms of number of sellers or percentage of sellers.
Through the year, we grew the number of sellers promoting items by over 80%, we exited the year.
That was more than 1.1 million sellers and represents more than $320 million listings in Q4.
Any millions third and 20 million sorry.
Thanks, Steve.
Your next question comes from Edward Yruma of Keybanc Capital markets. Please go ahead. Your line is open.
Hey, good evening, Thanks for taking the question I guess first on payments.
Are you noticing any change in conversion on when a seller is using payments and whether they're seeing any negative impact from from switching over and then second maybe just a follow up to one of the earlier questions. Scott you talked about really embracing authentically E Bay and I guess, just trying to think about some of the verticals that you've been very successful at historically any sense that you'll be able to kind of restart.
Maybe a more favorable growth dynamic in those verticals.
Through greater focus thank you.
Yes on payments conversion impact no. It's not down I think thats, just sort of a simple answer.
What you do see with payments is different user behavior as you would imagine buyers out now have more alternatives and sellers have a series of tools from which how to manage their payments and connect their payments with there.
They're listing activity, which makes it easier for them and so I think on both sides of the equation. This is a net positive and certainly the the conversions fine.
Typically ebay look at the way I alluded to it last time and what I would point you to in the script from today and the points that are made is as we think about not only how we've prioritized the product plans for 2020, but also as we think about which verticals that we experiment in and again. This is based on leveraging the structure.
Your data work that we've done the aspects that we've expanded upon recently and as we look towards 2020 and beyond you know really indexing higher on verticals that.
You know that are more authentically ebay that people think of and as much as its that it's about also the inventory that they think of it said when we talk about.
Vintage collectibles interesting items et cetera people think about some we just have to be more relevant not only in how we show up on our search results, but how that inventory is surgical and find a bill on the site in a way that doesnt to undermine our new buyers coming.
Into the ecosystem as we talked about a lot last year in prior and then most importantly over time also indexing on brands so more to come on that as we move forward, but for right now I think Thats I think Pete and the team has done an excellent job over the course of the planning horizon and setting us up for a 20 plan that is a very clearly.
Focused on vertical categories, along with Jordan and the other regional contributors to really focus on not where we think we can win.
Great. Thanks much.
Your next question comes from bands Chairman.
In multiple markets. Please go ahead, Sir your line is open.
Hi, guys good afternoon.
Maybe just a quick follow up on the display advertising headwinds in classified as if you could just expand on that a little bit Scott and maybe in particular, while you're not seeing it in Germany.
And then second just thanks for the update as well on the CEO search I may have missed it but I don't think you put a timeline on that one but just curious to see how do you think about.
How we might expect that to play out well the strategic review continues as well thanks.
Yes, absolutely look on the CEO search online, we didnt layout, a plan or a timeline, but just to reemphasize the board and a committed subcommittee of the board is working very actively to to find a.
An interview and find the best possible candidate.
With regards to headwinds and classified to I think it's important to note that there's a combination of factors going on particularly in our horizontal platform businesses and each one has it just two different degree.
In particular display ads are impacted by a what Andy called out which is the shift to mobile devices and that's been happening over time and its continuing and in some countries accelerating and the second is kind of the downstream impact of a lot of the changes within the privacy laws as well as what googles dawn and that limits.
To some extent both the market of display ads in the effectiveness as well as then what showing up on our site and I think that's pretty consistent across other players in the industry that said you know look as we head towards 2020 and beyond I think that will normalize and and I think the teams have done an excellent.
Rob as Andy called out, particularly in Kleinanzeigen as well as our automotive verticals to continue to expand and grow and so I don't I don't see this as a structural long term concern. It's just more of something that we've got to work through not dissimilar that to the internet sales tax.
Okay, great. Thanks.
Thank you.
Your next question comes from Brian Fitzgerald of Wells Fargo. Please go ahead, Sir your line is open.
Thanks, guys maybe related to a Steven's question second question, but thats, a little differently promoted listings revenue up 32% sequentially, but actual number pro Liftings I think was less than 10% growth. There can you can you walk through what the strongest driver there as it is it higher basis improved conversions and how much runway for repricings.
And conversions can we see there going forward. Thanks.
Brian It's a great question I think you answered it it's a combination of conversion I mentioned that in my script and Andy alluded to it as well that a number of things that we've been doing in the ecosystem.
Under the underlying structured data improvements and aspects that we've been collecting has given us a capability to then serve those ads up with more certainty about what people are looking for and what might fit on that page to improve conversion. The other side of it down obviously prices fluctuate and had been as I've gotten a little bit better and then I think.
Finally, you're going to see us continue to look at where and how we place. These these ads to make sure that they're accretive to the user experience.
Thanks, Thanks Scott.
Yep.
Next question comes from Justin Post at Bank of America. Please go ahead. Your line is open.
Great a couple of questions first on the international it's decelerated, obviously sales taxes on an issue.
Are there any countries that you'd call out that are doing better or worse and what are your big product initiatives to maybe help with the users and the growth there that you'd call out for international markets and the second question is obviously you believe ebay stock. So good value here have been aggressive with buybacks and helping grow earnings.
Its core ebay at all part of the strategic review are you looking at some of your options there. Thank you.
Thanks, Justin hate internationally I think the two countries to call out or are the UK in Korea.
For.
Different reasons. The UK is primarily macroeconomic we've been tracking our performance relatively well with.
What's happened in another market basis.
Just the uncertainty around Brexit as put pressure on the growth rates in the UK.
And then Korea as we've mentioned for several quarters, though it's been stable over the last quarter, but the continued pressure from from lower lower margin.
Tougher competitive couponing environment in Korea.
Yeah, I mean, as we look I'm, hoping international I think you got to pivot to on and off platform and if you look at off platform.
First off Japan, and Turkey continues to grow really well Korea as Andy mentioned is relatively stable in a very tough macro situation and keeping in mind that they actually make money.
In that market, whereas I don't like anyone else does and they're doing that team is doing a fantastic job vitter, adding on how to deliver growth in a market that that has those dynamics and I'd call. It two things for them.
One maybe more applicable to the rest of the platform, which is loyalty programs they've done an excellent job with Smile club and other parts of the loyalty program to to really capture over 2 million Koreans at this point that are part of our our pay loyalty program that bring great inventory a wonderful payments approach.
Payments capability with credit included and Ah first party inventory listings and it kind of capability to bring great value there as well as a.
A very our retail centric first party set of inventory that's offered on the platform and that's a bigger and bigger part of that part of the business. Every every month a team has done an excellent job and so while they may not be growing at the same rate some of the others that theres a billion dollars year, they're doing an excellent job at managing and manage.
King and driving profitable growth.
Even if it's lower than the overall and if you look at if you look at the on platform businesses.
There is a combination by market, we've talked about German plot, the plus where we've got a loyalty program there and we certainly learned and incorporated aspects from Korea into the German platform. We have the same in the UK and assuming you asking we continue to reiterate around those but I wouldn't point to any one.
One per se other than maybe in the UK and we alluded to this in the past, but what you'll see in 2020 is very unique.
Integration with Royal Mail, that's going to allow tracking which doesn't happen today unroll mariska, it's going to allow tracking on ebay that'll be a unique ebay and so consumers in the UK, we'll be able to see whether packages are and improve.
And improve their trust and confidence in receiving and when they're going to receive their item, but theres a lot of different ones by country, but generally speaking the larger platform on platform dynamics that I talked about will apply to most of those countries across the board.
And then I'm sorry.
Go ahead.
Yes, so look we do the like this you know the stock is it good bye.
We continue to be aggressive with a buyback.
In terms of core ebay being part of the review its you know.
Everything is part of it the way we approach it is exactly as we've talked to you about which is what disciplined in how we look at it and we continue to reiterate with the board. So I wouldn't call anything specific out at this point, but we look at everything.
Great. Thank you operator, we are for Walmart.
Certainly your last question will be from Brian Nowak of Morgan Stanley . Please go ahead. Your line is open.
Great. Thanks for taking my question I have two is the first one on 2020 G.M.B. I think you talked about how you're gonna have the ice tea challenges offset by higher conversion, maybe talk to us about some of the qualitative changes as a product improvements that you see driving that higher conversion throughout 2020, and then back to the for Q.
Flat buyer number you mentioned, how there was some higher churn than expected you to sort of talk to us about what you know what you saw in the consumers that were churning was it an inventory issue was it payment friction. So what did you observe that was causing that higher churn and how do you fix that going into 2020. Thanks.
I'll start with the buyer number Brian .
It's actually up 2% year on year. So just just to be clear, it's a 183 million buyers.
The churn I don't think if anything special in Q4, it's more a continuation of what we saw in Q3 and it's really following the increase in marketing we spent the mark the buyer driven marketing spend that we had in the second half of last year first half of this year.
Where we attempted to reactivate buyers and attract new buyers and what we saw would those cohorts is.
Visited less frequently spent less and and we're turning out at a higher rate and that became the you know the CMV in the value of those buyers started to to not not be worth the marketing dollars. We spent on them. So that's why we've been to pivoting away from that.
Towards retention and focused on some some higher value buyers.
Yeah with with 2020 GM via the Internet sales tax headwinds I really what you see is particularly at high higher ASP items, especially in electronics categories that Tom when people encounter at checkout sales tax they bounce away and the good news and that is that.
They are at least coming back and we're not losing them other than that transaction and so what you see as there is theres chunk of GMP that set that that's not.
Returning but it's not getting worse in the <unk> in the states that we've seen so far in so I don't really see that dynamics, there changing and then the underlying conversion we've had some minor benefits, but I wouldn't I wouldn't point to one thing above all the others I think in a marketplace in an ecosystem like ours, it's going to its.
It's and it's imperative to be working on the seller experience and making so tools and sort of dynamics better as well as the buy side and I think broadly speaking on some of the efforts that we did in 2019 as we look at conversion improved and as we look towards 2021 proof, we're not pointing to one thing, but it's a series of things to try and.
The overall ecosystem. Thanks for the question Brian .
This concludes the allotted time for questions. Thank you for your participation you may now disconnect.